Chapter 7: Straight Bankruptcy or Liquidation

WHAT IS A CHAPTER 7 BANKRUPTCY?

In a Chapter 7 bankruptcy, you file a petition asking the court to discharge your debts. The basic idea in a Chapter 7 bankruptcy is to wipe out (discharge) your debts in exchange for your giving up property, except for “exempt” property which the law allows you to keep. In most cases, all of your property will be exempt. But property which is not exempt is sold, with the money distributed to creditors. If you want to keep property like a home or a car and are behind on the payments on a mortgage or car loan, a Chapter 7 case probably will not be the right choice for you. That is because Chapter 7 bankruptcy does not eliminate the right of mortgage holders or car loan creditors to take your property to cover your debt.

WHAT MONTHLY PAYMENTS ARE YOU REQUIRED TO MAKE?

Although some of your debts will be discharged as a result of filing a Chapter 7 bankruptcy, there are certain debts which you must continue to pay so that you have the right to keep the collateral which secures those debts. You must make regular payments on these debts, each and every month, as the payments become due, and send these payments directly to the creditor. The creditor might not send you a bill or book but, if you do not keep the payments up-to-date, the creditor can take steps to take your property away.

WHAT DEBTS ARE NOT ELIMINATED BY A CHAPTER 7 BANKRUPTCY?

Certain debts are not eliminated by bankruptcy. There are too many types of such debts to list them all here, but some of the most common include student loans, most taxes, Alimony and/or Child Support and some other divorce related debts.

WHAT HAPPENS WHEN YOU SURRENDER PROPERTY TO A CREDITOR?

When you “surrender” property back to a creditor in a bankruptcy case, this simply means that you don?t have to pay that creditor any more money. It does not mean that the property is automatically taken out of your name. In many situations, when you “surrender” property in a bankruptcy case, the creditor will promptly foreclose or repossess the property. However, there is no guarantee that the creditor will do so. Until something happens to get the property out of your name, you will still owe any debts?such as real or personal property taxes that come due with respect to the property?because the property is still in your name. Therefore, if the creditor does not quickly foreclose or repossess upon the property that you surrender, you may want to contact the creditor to find out why. Of course if a creditor never takes action to assert its rights, you may continue to use the property.

WHAT HAPPENS TO YOUR TAX REFUNDS?

Any tax refunds you are entitled to as of the date the bankruptcy case is filed are considered “property of the estate”. The trustee assigned to the case has the right to demand that the tax refunds be paid over to him or her for distribution to creditors. If you are required to pay over your tax refund and you do not do so, you could be denied the benefits of your bankruptcy case.

WHAT DO YOU DO ABOUT CLAIMS OR LAWSUITS YOU HAVE AGAINST OTHER PEOPLE?

It is your responsibility to notify your attorney if, at any time during the case, you realize you have a claim or lawsuit against any other person or company (1) which was not listed in your schedules and (2) the basis for which arose before the filing of the bankruptcy case. The failure to notify your attorney could result in that claim being lost and the lawsuit arising from the claim, if any, being dismissed. However, without further written agreement, notifying your attorney does not mean that your attorney will represent you regarding any such claim or lawsuit.

IF YOU ARE LOOKING FOR A BANKRUPTCY ATTORNEY

CALL THE LAW OFFICE OF ROSALIND G. PARR & ASSOCIATES AT (219) 756-3316
OR TOLL FREE AT (877)381-0018
FOR A FREE CONSULTATION!